On the go and no time to finish that story right now? Your News is the place for you to save content to read later from any device. Register with us and content you save will appear here so you can access them to read later.

Facebook is digging in over its fight with the Internal Revenue Service. The social network said this week that it faces a potential $5 billion tax bill after moving some of its assets to Ireland.

The company's tussle with tax authorities dates back to its decision in 2010 to transfer many of its global "intangible" assets - those not in the United States or Canada - to its Irish holding company.

The transfer allowed the company to pay a lower tax rate on the profits made from those assets, tax experts say. (The corporate tax rate in Ireland is 12.5 per cent, compared with 35 per cent in the United States.)

The IRS said in court documents the way the assets were valued was "problematic" and that the "transferred intangibles" may have been undervalued by "billions of dollars."

Facebook reported more than $2 billion in profits during its second quarter, said it received a "deficiency" notice from the IRS and could end up with a tax bill of $3 billion to $5 billion, plus interest and penalties.

"We do not agree with the position of the IRS" and will challenge the decision, the social network said in an Securities and Exchange Commission filing. If the IRS prevails it "could have a material adverse impact on our financial position."

The tussle comes amid a worldwide reexamination of the tax strategies employed by US multinational corporations.

French authorities raided the Paris headquarters of Google and McDonald's in May and the European Commission is investigating tax deals that Amazon and Apple reached in Luxembourg and Ireland.

Facebook's transfer of some of its assets to Ireland has become a common maneuver used by US technology and pharmaceutical companies, tax experts have said. The strategy allows the companies to keep more of the money they earn, but it has come under criticism from some in Congress who say the firms are not paying their fair share.

The social network has said expects its effective tax rate to fall from 40 per cent to about 27 per cent this year. That is considerably lower than the federal corporate tax rate, 35 per cent.

But even its posted effective rate may be higher than what the company actually pays because it doesn't reflect deductions taken for stock options issued to employees or other expenses, tax experts say.

An IRS spokesman said the agency does not comment on companies. A Facebook spokesperson could not be immediately reached for comment.